What You Need to Know
- Chairman Gensler asks staff to consider recommendations for disclosure of criteria and data underlying investments.
- Gensler also questions the current naming conventions for funds more generally.
- He also wants staff to study disclosures about diversity at the board and senior management levels of asset managers.
The Securities and Exchange Commission is concerned about the lack of clarity in the sustainable investing fund universe and is considering requiring more disclosure about the criteria and data funds use as well as new naming conventions.
“When it comes to sustainability-related investing … there’s currently a huge range of what asset managers might mean by certain terms or what criteria they use,” SEC Chairman Gary Gensler said before Wednesday’s Asset Management Advisory Committee meeting.
He described the variety of investment approaches used by funds and the assertions they make — screening out industries such as fossil fuels and tobacco, claiming minimal greenhouse gas emissions from their corporate assets, using terms like “green” or “sustainable’” — usually without providing the criteria and data that underlie those terms and assertions.
“I think investors should be able to drill down to see what’s under the hood for these funds,” said Gensler, noting the lack of standardization of the labels that sustainable funds use.
With that in mind, Gensler said he is directing staff to consider recommendations about whether fund managers should disclose the criteria and underlying data they use and study current naming conventions for funds, which are largely based on investment types rather than investment strategies.